Revising the CPI for the Eastern Caribbean Currency Union

ECE/ILO CPI MeetingGeneva, Switzerland

May 10 -12, 2010

May 12, 2010 CPI in ECCU: 2CARTAC

Introduction

Household income and expenditure survey

Development of new market basketsImproving methods and procedures

recommended in the CPI Manual, 2004Use of Price Index Processor System to

process and compile the CPI

May 12, 2010 CPI in ECCU: 3CARTAC

Household income and expenditure surveys

Caribbean Development Bank funded Living Conditions Surveys and countries expanded to HIES (2006-08)

Included both Diary and Recall componentsCOICOP expanded to 7 digit for regionUsed to develop new market baskets

consisting of 200 or so items at 5 to 7 digits

May 12, 2010 CPI in ECCU: 4CARTAC

New CPI market baskets

Completed for Antigua, Anguilla, Dominica, Grenada, St. Kitts and Nevis, St. Vincent

Just starting in MontserratSt. Lucia completed CPI revision in 2008Original market baskets developed using

Caribbean COICOP extension Had to be mapped to COICOP-ICP

May 12, 2010 CPI in ECCU: 5CARTAC

Improvements to CPI methods and procedures

Improved, expanded samples of outlets New item structures that include many new

products (MP3, computer, cell phones)COICOP replaces regional classification

structures Includes housing (owner’s equivalent rent)

May 12, 2010 CPI in ECCU: 6CARTAC

Improvements to CPI methods and procedures (cont’d)

Use of the Price Index Processor System (PIPS) Database application vs. spreadsheets Compilation of indexes using geometric means Imputation of missing prices using the short-term

price change of related products Better procedure for making quality adjustments Better procedure for introducing new goods

CPIs are comparable across the region

May 12, 2010 CPI in ECCU: 7CARTAC

Calculating the CPI using PIPS

Uses Jevons vs. Dutot or Carli formula at the elementary level

Uses two-stage geometric formula for higher-level aggregates

1/1

0 11

(1)

Nt tNi i

J ti i i

p pP

p p

1

0 10

(12)

bit tN

i i0 t t

i i i

wp p

= Ip p

May 12, 2010 CPI in ECCU: 8CARTAC

Calculating the CPI using PIPS (cont’d)

The formula actually used is determined by the reference period values for the weights, w

bi

If b = 0, then the index is geometric Laspeyres If b < 0, then the index is geometric Young If b = (0 + t) / 2, the index is Törnqvist

For the ECCU countries the geometric Young index is being used

May 12, 2010 CPI in ECCU: 9CARTAC

Calculating the CPI using PIPS (cont’d)

Missing prices are imputed using matched sample of prices between the two periods

The PIPS provides an outlier detection feature using three methods: Z – score methods Box-plot method Log-normal method

May 12, 2010 CPI in ECCU: 10CARTAC

SummaryECCU countries are completing the CPI

revision processCARTAC has provided substantial TA in

this processCountry CPIs in the region are comparableAmong the first wave to introduce many

improvements presented in the CPI ManualNext step is to develop a regional CPI